Pessimism Dominate Markets as the Feds Refrained From Offering New Stimulus

As concerns about the European debt crisis are deepening while the Feds offered no new stimulus to boost the economy yesterday, demand for safe haven is still high as investors are avoiding the riskier higher yielding assets.

The Feds offered no new measures to stimulate the economy although growth is modest, yet they warned from the downside risks from Europe’s debt crisis. More downside pressures were imposed by the weak U.S. retail sales report yesterday.

Today German Chancellor Angela Merkel is expected to give a statement to the German parliament about last week’s summit, while OPEC will meet to discuss oil production targets, with projections to keep oil output at current levels.

Markets will follow today a bond auction from Italy and Germany worth a combined 8 billion euros, and later in the day the U.S. will release its EIA crude oil inventories report and its import prices index.

IMF said that Greek GDP will contract 6% in 2011 compared to a Greek projection of a 3% contraction, while the German IFO institute cut its 2012 growth forecast for Germany to 0.4% from 2.3%, confirming the depth of the crisis in the region.

As the economic environment continues to deteriorate Asian stocks dropped today as risk aversion is still fueled by caution, Nikkei 225 fell 0.39% while Hang Seng was down 0.50%. In Europe DAX fell 0.51%, and CAC 40 fell 1.01%.

Today inflation slowed to the lowest in a year in India, in Japan the industrial production fell to 2.2% in Oct., in China the money supply growth was the weakest in 10 years, in UK unemployment hovered around the highest level in 17 years, while in Europe the industrial production fell to -0.1% in Oct.

Such disappointing results highlight the risks of a deeper slowdown in the global economy, while Europe’s possible downgrade continue to weigh on sentiment leaving currency markets moving in tight ranges.

Caution is keeping the euro and the dollar index moving in tight ranges today, where the USD is trading around the 80.25 level, while the euro is trading around the 1.3035 level, while the yen is trading around the 77.95.

The pound however gained slightly, trading now around the 1.5500 level as the unemployment report matched expectations. The AUD is almost unchanged and is currently trading at 1.0015 while the CHF is trading in a tight range around the 0.9460.

Today’s light trading is keeping the commodities in a tight range, yet with mixed results, where oil is trading with bearish momentum around the $99.60 level, while gold is recovering some of the losses, trading now around the $1635.30.

Leave a Reply

Your email address will not be published. Required fields are marked *